It is not just the loss of money; it is the greater related losses.
Money is like water being pumped out of the ground and stored in a tank until it is needed for different purposes. So, consider this:
- If the water flowing into the tank is more than the water being used, the tank will eventually be full to overflowing, and one would need another tank.
- It is reassuring to know that there is always some water in the tank, and the more tanks there are the greater that assurance.
But here is the problem. You must control the amount of water / money you take from the tank and more importantly you must be sure that the tank does not leak, because even small holes in the tank will allow massive amounts of water/ money to escape.
Here are some of the most common MONEY LEAKS:
| A pack of 20 Cigarettes costs | £13.35 |
| One packet per day for a month | £400.50 |
| In 12 months, the money that has leaked away is | £4,806.00 |
If that were your Christmas bonus it would pay for a really nice present.
But look at this. If you close that leak, stop smoking, and invest the money.
| In ten years,’ time you would have | £48,060.00 |
| In twenty years, time you would have | £96,120.00 |
That could repay the bond on the house.
If I put £ 96,120.00 in notes on a table and burnt the notes you would say I was crazy. In effect that is exactly what a smoker has done over a period of 20 years. But the bigger problem is the destruction of health and vitality that really comes back to haunt you when you are retired and should be enjoying the benefits of 40 years of employment.
Two beers a day and a bottle of spirits per week will add another £68,000.00 to the above figure over a period of 20 years.
But these are the little holes.
These are the big Holes, the interest you pay on:
- Your credit card.
- The Hire purchase of household goods / furniture.
- The financing of a car.
- Overdue accounts. Anybody’s guess.
- Overdrafts. The maximum the bank can get.
- Loans. Depending on the risk.
Not to mention the transaction costs every time you use a card for a purchase or a payment.
Plus, the fact that if you had saved the money and then selected the goods you wanted to buy, you could have negotiated incredible discounts on the purchases. So, there is a double reward for paying with cash.
If a person started a career, used public transport to get to and from work and saved the money he or she. would be paying on the purchase, and other costs of a vehicle for five years, here is what happens…
At the beginning of year six they could buy an inexpensive reliable vehicle for cash. Use the earlier transport costs to run the vehicle, continue saving, and drive a new vehicle every third year, and never pay interest on a vehicle. Multiply the interest you are paying on a vehicle instalment by 240 or 360 to understand the size of the hole in your money tank.
Close the leaks.
The first and best investment for any individual is to kill the credit, pay the accounts, pay more than the minimum required on the bond and the bigger hire purchase amounts. A little more paid every month will reduce the cost of your bond or hire purchase by thousands of Pounds.
Budget to kill the debts. Once you are out of debt, destroy the credit cards and account cards. Save, negotiate, and pay cash for the goods you decide to buy.
Consider the health consequences. All the money in the world is worth nothing if you do not have the health to enjoy the benefits.